The UN nuclear watchdog is preparing to publish evidence that Iran is not engaged in a nuclear weapons programme, undermining a warning of possible military action from President George Bush.

The US President told Israeli television that "all options are on the table" if Iran fails to comply with international calls to halt its nuclear programme. Both the US and Israel - the Middle East's only nuclear-armed power - were "united in our objective to make sure Iran does not have a weapon", he said.

However, Iran is about to receive a major boost from the results of a scientific analysis that will prove that the country's authorities were telling the truth when they said they were not developing a nuclear weapon. The discovery of traces of weapons-grade uranium in Iran by UN inspectors in August 2003 set off alarm bells in Western capitals where it was feared that Iran was developing a nuclear weapon under cover of a civil programme. The inspectors took the samples from Iran's uranium enrichment plant at Natanz, which had been concealed from the International Atomic Energy Agency (IAEA) for 18 years.

But Iran maintained that its nuclear programme is for peaceful purposes, and that the traces must have been contamination from the Pakistani-based black market network of scientist AQ Khan. He is the father of Pakistan's nuclear bomb.

The analysis of components from Pakistan, obtained last May by the IAEA, is now almost complete and is set to conclude that the traces of weapons-grade uranium match those found in Iran. "The investigation is likely to show that they came from Pakistan," a Vienna-based diplomat told The Independent on Sunday.

The new information, which strengthens Iran's case after last week's contentious IAEA board meeting in Vienna, will be a central part of the next report to the board by Mohamed ElBaradei, the IAEA chief. "The biggest single issue of the past two years has now fallen in their [the Iranians'] favour," the diplomat said. The meeting of the 35-nation board, which ended last Thursday, urged Iran to suspend the uranium-related activity at its Isfahan plant, which many fear will be the first step towards building a nuclear weapon.

The resumption of uranium conversion at the plant last week caused an international crisis and prompted Britain, France and Germany, which have been attempting to find a negotiated solution to the dispute, to call the emergency IAEA meeting. In its resolution concluding the meeting, the board also asked Dr ElBaradei to report back by 3 September. Hardliners on the board - including Britain, the United States and Canada - had hoped that Dr ElBaradei's next report would be sufficiently damning to increase the pressure on Iran.

However those hopes will be dashed by the revelation about the IAEA analysis of the particles from Pakistan, which will remove any chance of Iran being referred to the UN Security Council. But the IAEA is not closing the book on its investigation of Iran's possible weapons programme. A team of IAEA experts arrived in Iran on Friday to pursue other outstanding issues, but they are unlikely to be resolved by the time Dr ElBaradei reports to the board.

The three European countries are fast running out of options, as there is no appetite among non-nuclear states on the IAEA board to report Iran to the Security Council for punitive sanctions, when there is no legal basis to do so. Iran, which agreed to suspend its uranium conversion during the talks with Britain, France and Germany, insists on its right under the Nuclear Non-Proliferation Treaty to enrich uranium for peaceful purposes.

The Iranian authorities restarted Isfahan after rejecting a package of security and economic incentives submitted to Iran 10 days ago by the three countries which sought a binding commitment that Iran would not pursue fuel cycle activities. "It's difficult to see things moving ahead if Europeans think that every country can have enrichment facilities except Iran," one Western diplomat said.

Dr Ian Davis, the director of the British-American Security Information Council (Basic), an independent nuclear thinktank, said that if the Europeans were prepared to compromise on the fuel cycle issue, "the negotiations may yet prevent a crisis".

However, a Foreign Office spokesman insisted that a new round of negotiations scheduled with Iran for 31 August would go ahead only if Tehran again suspended uranium conversion. "There are no talks with no suspension," the spokesman said.

Iran, sensing that it is gaining international support for its stand and with a new hardline President in power, also looks as if it is in no mood to compromise at this point.

The UN nuclear watchdog is preparing to publish evidence that Iran is not engaged in a nuclear weapons programme, undermining a warning of possible military action from President George Bush.

The US President told Israeli television that "all options are on the table" if Iran fails to comply with international calls to halt its nuclear programme. Both the US and Israel - the Middle East's only nuclear-armed power - were "united in our objective to make sure Iran does not have a weapon", he said.

However, Iran is about to receive a major boost from the results of a scientific analysis that will prove that the country's authorities were telling the truth when they said they were not developing a nuclear weapon. The discovery of traces of weapons-grade uranium in Iran by UN inspectors in August 2003 set off alarm bells in Western capitals where it was feared that Iran was developing a nuclear weapon under cover of a civil programme. The inspectors took the samples from Iran's uranium enrichment plant at Natanz, which had been concealed from the International Atomic Energy Agency (IAEA) for 18 years.

But Iran maintained that its nuclear programme is for peaceful purposes, and that the traces must have been contamination from the Pakistani-based black market network of scientist AQ Khan. He is the father of Pakistan's nuclear bomb.

The analysis of components from Pakistan, obtained last May by the IAEA, is now almost complete and is set to conclude that the traces of weapons-grade uranium match those found in Iran. "The investigation is likely to show that they came from Pakistan," a Vienna-based diplomat told The Independent on Sunday.

The new information, which strengthens Iran's case after last week's contentious IAEA board meeting in Vienna, will be a central part of the next report to the board by Mohamed ElBaradei, the IAEA chief. "The biggest single issue of the past two years has now fallen in their [the Iranians'] favour," the diplomat said. The meeting of the 35-nation board, which ended last Thursday, urged Iran to suspend the uranium-related activity at its Isfahan plant, which many fear will be the first step towards building a nuclear weapon.

The resumption of uranium conversion at the plant last week caused an international crisis and prompted Britain, France and Germany, which have been attempting to find a negotiated solution to the dispute, to call the emergency IAEA meeting. In its resolution concluding the meeting, the board also asked Dr ElBaradei to report back by 3 September. Hardliners on the board - including Britain, the United States and Canada - had hoped that Dr ElBaradei's next report would be sufficiently damning to increase the pressure on Iran.

However those hopes will be dashed by the revelation about the IAEA analysis of the particles from Pakistan, which will remove any chance of Iran being referred to the UN Security Council. But the IAEA is not closing the book on its investigation of Iran's possible weapons programme. A team of IAEA experts arrived in Iran on Friday to pursue other outstanding issues, but they are unlikely to be resolved by the time Dr ElBaradei reports to the board.

The three European countries are fast running out of options, as there is no appetite among non-nuclear states on the IAEA board to report Iran to the Security Council for punitive sanctions, when there is no legal basis to do so. Iran, which agreed to suspend its uranium conversion during the talks with Britain, France and Germany, insists on its right under the Nuclear Non-Proliferation Treaty to enrich uranium for peaceful purposes.

The Iranian authorities restarted Isfahan after rejecting a package of security and economic incentives submitted to Iran 10 days ago by the three countries which sought a binding commitment that Iran would not pursue fuel cycle activities. "It's difficult to see things moving ahead if Europeans think that every country can have enrichment facilities except Iran," one Western diplomat said.

Dr Ian Davis, the director of the British-American Security Information Council (Basic), an independent nuclear thinktank, said that if the Europeans were prepared to compromise on the fuel cycle issue, "the negotiations may yet prevent a crisis".

However, a Foreign Office spokesman insisted that a new round of negotiations scheduled with Iran for 31 August would go ahead only if Tehran again suspended uranium conversion. "There are no talks with no suspension," the spokesman said.

Iran, sensing that it is gaining international support for its stand and with a new hardline President in power, also looks as if it is in no mood to compromise at this point.